Did Drivers Get Screwed With The Uber Lawsuit Settlement?

A couple weeks ago, news broke that the Uber Misclassification Lawsuit in California had been settled. This came as a big surprise to me and many others who’d been watching the case. But now that some time has passed, I wanted to break down what it means for all parties involved.

The first thing that drivers need to understand is that this settlement still needs to be approved by Judge Chen. There’s a preliminary approval hearing on June 2 and we may know more about the details and time-line then, but with a case this big, even the settlement process (if it’s approved) could extend well into 2017. So drivers looking to get paid will have to be very patient.

Uber has already started implementing some of the non-monetary concessions from the settlement like the driver deactivation policy (nationwide) and an appeals process for deactivations. Although to be fair, Uber started piloting the latter in Seattle months ago, so even though it’s technically included in the settlement, it seems like they were planning on doing it anyways.

It Seems Like Uber Is The Big Winner Here

It’s not often that being forced to pay out $84 million makes you “the big winner”, but I have to imagine there were a lot of people at Uber who did their happy dance when this settlement came down. This was a big case and in addition to all the media coverage, a defeat could have had a huge impact on their valuation.

The Biggest Risk to Uber’s Valuation

Uber probably isn’t going public any time soon, but they’re still actively raising money, and labor classification (employee vs 1099) has always been one of the biggest threats to its valuation. An $84 million settlement might seem like a lot of money, but when you compare it to Uber’s most recent valuation of $62.5 billion, it’s pretty minuscule. In fact, it’s only .13% of their current valuation!

Losing this lawsuit (or even going to trial) could have cost them a lot more than a couple percentage points on their valuation, so from a valuation-risk perspective, this settlement was a big win for Uber. And going forward, the settlement could will be used as ammunition in their next round of fund-raising to seek an even higher valuation.

How Much Should Uber Pay?

Per chi1cabby on UberPeople, this case was settled for 15% of the total damages based off on-trip miles (the amount of time with a passenger in the car). It’s pretty hard to tell exactly what amounts, percentages and miles were used for this settlement because most of the pertinent financial figures are blacked out. But right off the bat, we know that ‘rider miles’ is not an accurate representation of the total miles an Uber driver drives.

If we look at Uber’s own blog post from the end of 2015, we see that on-trip miles only make up about half of a driver’s time. Taxi drivers have told me that they do about 2 unpaid miles for every paid mile and in my experience, Uber drivers are more efficient but still log around 1 unpaid mile for every paid mile.

(Unpaid miles come in the form of driving to pick-up a passenger after you accept the request, driving around looking for passengers (usually not a good idea but lots of drivers do it) and driving into/out of the city since most drivers can’t afford to live in the city centers where it’s busiest.)

If both parties would have used ‘real mileage’ calculations, the potential reimbursement would have at least doubled making the 15% they settled on only 7.5%. If we look at the very similar Lyft lawsuit, Judge Chhabria actually rejected the settlement offer of $12.25 million, which was only around 10% of the re-calculated potential damages of $126 million, citing that it was too low of an amount.

Uber and SLR obviously have the right to settle on whatever % they want, but the judge still has to approve that amount. So it wouldn’t surprise me if the judge in this case (who always seemed pretty skeptical of Uber’s treatment of drivers) gave drivers a bigger monetary settlement.

Want To Do Some Reading?

Admittedly, I haven’t read through every page yet, but there is some interesting information if you’d like to read some of the briefs that have been filed so far.

What Did Drivers Get Out Of All This?

My immediate reaction to this settlement is that drivers got screwed. If you were for this lawsuit and wanted to be an employee, you were probably pissed because you basically lost the case. If you were like me and didn’t want to be an employee (but wanted more of a true IC relationship), you probably still feel like Uber got off too easy and/or the lawyers got too much money.

And I think the big reason for those feelings is because there’s not a lot of immediate impact for drivers. The money won’t amount to much when split up among 385,000 drivers, and a lot of the concessions that Uber made sound great on the surface but who knows how they’ll actually play out in real life.

Drivers Will Remain Independent Contractors

I think most drivers want to be independent contractors, but the problem is that as an Uber driver, you’re not a true independent contractor. You obviously have some say in when and where you work, but with things like guaranteed pay that require you to work only in certain areas and only during certain times, how is that independent? There are countless other examples that illustrate this point.

But conversely, I also understand that Uber wouldn’t function well if drivers were completely free to set their own rates (Sidecar anyone?) and accept only the most profitable rides (i.e. no short min. fare rides). Taxi drivers used to be notorious for cherry-picking longer fares since they were more profitable and it’s one of the reasons why Uber has become so popular with consumers – they don’t allow that.

But I also think there’s a lot of room for middle ground and compromise. As it stands now, Uber sets the rates and they tell drivers ‘this will be good for you, trust us’, which is analogous to a stranger offering you free candy. Probably not a good idea. But if we had ‘some say’ in what those rates were, maybe we wouldn’t be so bitter about driving 15 minutes to pick up a passenger who wants to go two blocks for a net $2.40.

Drivers’ Association

This is one of those concessions that sounds great on paper but I remain cautiously optimistic about it. Organizing hundreds of thousands of drivers is no small feat and if Uber’s going to pay for it, that’s potentially millions of dollars on the table.

So it’s no surprise that organizations like the Teamsters have pounced on the opportunity to ‘represent Uber drivers’. If it turns out that an organization like that is the one representing Uber drivers, I can’t imagine that they would have driver’s best interests at heart and the value of this association would decline rapidly for me.

But let’s imagine that a group of drivers were elected by the drivers themselves and The Teamsters helped organize that group. That could be an organization that really ends up benefiting drivers since they’d be able to formally meet with Uber and potentially come to a compromise on a lot of the issues that drivers face on a daily basis.

Published Deactivation Policy

I think it’s great that Uber has finally published their deactivation policy, but why did it take a settlement to get this concession? Isn’t this a standard thing at every company you’ve ever worked for? Transparency is always a good thing but this ranked pretty low on the list of concessions for me, especially since anyone who reads this blog should already know about a lot of these reasons.

No Deactivations For Low Acceptance Rates

Again, not being deactivated for low acceptance rates is something that would really benefit drivers, but we need to see how it plays out in real life. The wording in the settlement already hints that drivers will be ‘timed out’ for not accepting enough rides but how long will the time out be? Is it 2 minutes, 2 hours or 2 days?

We know there are big problems with UberPool for example, with drivers complaining incessantly about these requests and many of them flat out refusing to do them (we call that peeing in the pool). And I feel the same way: I don’t think drivers are fairly compensated for the increased workload on UberPool rides. Based off the new policies, it sounds like drivers will be able to decline/ignore every second Pool request or even the first Pool request. That would cause a lot of reliability problems for Uber, so how will they combat it? Will they deactivate a bunch of drivers or will they raise the compensation for UberPool rides?

My hope is that in this type of situation they would recognize a problem and address it in a way that makes sense for all parties involved. But if we go based off past history, that just hasn’t happened very often. Most of Uber’s solutions and policies are beneficial to customers and passengers instead of the drivers.

Drivers Can Now Still Accept Tips

Tipping has always been a polarizing issue for drivers and Uber. Many passengers are under the impression that tip is included in their fare, and Uber hasn’t done much to dissuade that line of thinking. When drivers were making more money, no one complained about the lack of tipping but now that wages have gone down, a $1 or $2 tip could mean a 10-20% boost in your hourly income. So yeah, it’s a big issue.

With the settlement, Uber drivers will now be allowed to post a sign in their car that says something to the effect “Tips are not included, they’re not required, but they are appreciated.” Now personally, I was under the impression that you could always do this, but I guess the settlement clarified this point.

I’m actually kind of excited for this part of the settlement since I think if enough Uber drivers put these annoying signs in their car, riders will complain about it to Uber to the point where they have to at least consider adding an in-app tip option. It’s a long shot but it’s already generated a lot of media buzz and forced Uber to comment on it for the first time.

Stay tuned for next week’s article (subscribe to our e-mail list here) as we’ll be testing out some ‘tipping’ signs while driving for Uber and seeing what type of reactions AND TIPS we get!

Should This Case Have Been Settled?

In the aftermath of everything, this is really the big question: should this case have been settled? Now I’m not a lawyer, but I do know how to read, and over the past couple weeks, I’ve read a lot about the potential challenges this case was going to face.

According to SLR, the biggest risks to this case were a recent ruling by the Ninth Circuit court of appeals that would have reviewed Judge Chen’s (district court) orders on arbitration and class certification and the possibility of a jury siding with Uber. The latter was always a risk of this case, so I’m not so sure it can be used as a reason to settle unless a settlement is what they were after in the first place.

On the first point though, it took me a while to understand the Ninth Circuit Court of Appeals’ review but in short what it means is that currently, the class of drivers sits at 240,000. If the Ninth Circuit court of appeals reversed Judge Chen’s class certification ruling, the class would go from 240,000 drivers to 8,000 drivers. Additionally, even if the Ninth Circuit agreed with Judge Chen on the class action, Uber could still appeal to the Supreme Court, which Uber indicated they would do (but there’s no guarantee the Supreme Court would have heard this case).

SLR says that the reason why this is important though is because even if Uber were to lose at trial for those 8,000 drivers, they would still not be forced to pay out a single penny to the other 232,000 drivers or even classify workers as employees. Those other 232,000 drivers would have had to file individual arbitration cases against Uber, but my guess is that if Uber lost the case for 8,000 drivers, it would set pretty good precedent for those individual drivers to file.

So in essence, this case was settled in order to get at least something for 240,000 drivers instead of having to fight for employee status for only 8,000 drivers.

Were The Lawyers The Big Winners?

A lot of the feedback I’ve gotten from drivers about this settlement has been pretty negative. Like I said, those who wanted to be employees were upset, but even those who wanted to be independent contractors had similar feelings of anger. I think a lot of that anger stems from the fact that Uber’s concessions won’t have much of an immediate impact on drivers and the lawyers in this case made a lot of money.

According to the settlement docs, SLR’s law firm stands to recover 25% of the damages, or $25 million (25% is standard for class action lawsuits). Anyone who’s been involved in class actions before can tell you that high payouts for the lawyers involved are typical, so the amount shouldn’t come as much of a surprise. Lawyers in class-action suits don’t get paid a single penny until there’s a settlement or they win the trial. So that means they get nothing if they lose and when you weigh $25 million vs the prospect of fighting for another 5-10 years and potentially getting zero, it’s pretty hard for anyone to say no to a settlement.

Now I’m not going to say the lawyers in this case sold out, but you have to admit that by nature, class actions incentivize settlements. Drivers weren’t looking for payouts with this lawsuit, they were looking for structural change and they did not get it. Sure, it may come eventually, but as of today, no real change has happened and that is a fact.

It’s a little bit depressing, but drivers are really the ones who get screwed in these types of situations. Uber gets off with a slap on the wrist, the lawyers get rich and it also opens up the door for future lawsuits. In fact, it wasn’t long before two new class action lawsuits (excluding drivers in CA/MA) were filed. Uber is obviously going to fight these in the same capacity as the CA lawsuit, and ultimately they’ll probably end up settling in exchange for a few more minor concessions if they even make it to trial.

It’s always possible that Uber will start listening more to drivers, help form associations that represent driver’s best interests, give drivers more freedom with their acceptance rate and maybe even add an in-app tipping option. But that’s a lot of what if’s. I’m an optimistic person by nature, but the reality is that it’s hard to affect change from a $62.5 billion company if they don’t want change to happen. Lawyers probably aren’t going to be able to solve this problem, so ultimately, it’s up to the government. And so far, they haven’t fared too well either going up against Uber.

Unhappy With The Settlement?

If you’re unhappy about this settlement, you have a few options to voice your concerns. I suggest the following:

FAQ

How much will I get from this settlement?

The amount you receive will be based on the total number of miles you drove. If you drove 25,000 miles or more, you could receive a few thousand dollars or more. The average driver will receive only a couple hundred dollars or less though.

When will I get my money from this settlement?

The settlement still needs to be approved by Judge Chen, but if it’s approved, it might still take up to a year to get payments processed.

Does this settlement apply only to drivers in CA/MA?

The monetary settlement only applies to drivers in CA/MA, but some of the non-monetary concessions like the driver deactivation policy will apply to drivers everywhere. Other items like the driver’s association will start out in CA/MA and potentially be rolled out to every state but there’s no legal requirement to do so.

Drivers, what do you think about the Uber settlement now that a couple weeks have passed since the news came down? Do you think drivers could have gotten more out of the settlement or should SLR have taken this thing to the finish line regardless of the risks?

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I'm Harry, the owner and founder of The Rideshare Guy Blog and Podcast. I used to be a full-time engineer but now I'm a rideshare blogger! I write about my experience driving for Uber, Lyft, and other services and my goal is to help drivers earn more money by working smarter, not harder.

This was about more than just worker classification; this was about a small window of opportunity to change the world and now it might be gone forever. This would have been a precedent-setting case for the future of the sharing economy and with this pitiful result, Uber has now established the precedent in their favor. The next state, where drivers feel underpaid, abused or unheard, just got more difficult for those drivers to prevail. It is only in a court-of-law that Uber’s money doesn’t rule. Judge Chen had repeatedly ruled in favor of the drivers and while there are never any guarantees, the drivers and SLR best hope of maximizing the settlement to drivers and establishing precedents that could last for a generation all disappear; this as fat cat Uber licks it’s chubby chops. IMO, this matter should have never been settled & I urge everyone to utilize the above links to voice your displeasure with the settlement. I would rather take them into a courtroom & lose than to accept a meager settlement like this & miss the likely ONLY opportunity ANYONE will ever have to hold Uber’s feet to the fire.

I do agree that if there was a case that was going to be won, this one seemed like the one. And while your attitude is commendable, where are you going to find a lawyer that will think like that?

What lawyer or person for that matter, in their right mind would spend millions of dollars of their own money swinging for the fences only to lose and not get paid a dime. I think maybe the problem was we set our expectations too high with this case. What do you think?

I Pledged Allegiance

I honestly get the feeling that most of these Judges are sick and tired of seeing these same class action lawsuit claims from the same old class action lawyers that they don’t even hear us , the voice of the actual working or formerly working people. This is how these lawyer try to make their money and to be honest , they are the ones ripping people off or trying to by using the same old petty state law employment violations over and over and over against any and every company that they can . And the cycle then repeats again every 5 years or so. It’s craziness.
I know I used to think oh cool I can get some money if I sign to be part of the class that is owed for some lawsuit notice in the mail. There is so much more to it than that. I have higher standards and principals now and while the small pocket change I ended up receiving did come in handy I have nothing to show for it except my name in a Google search because I made a mistake once

While the atty did a lot of grunt work (tho mostly done by paralegals and assistants in reality) the heavy lifting (and the $$ spent) is done during litigation..Atty gal was spared that expense..and got paid.

The drivers were enticed with reimbursement per mile and back dated tips..A huge prize, after the settlement we got barely the prize from a crackerjack box.

For myself I would rather go down swinging for the fences and fail than continue on a course guaranteed to fail.

Simply put, a driver needs to be paid “replacement value”..money that can be put aside to replace the vehicle after maintenance costs or eventually that driver will not be able to work cos’ no car!

We do not get paid that money, we are all out of business eventually and the folks getting rich today (Uber execs) will be long gone and it will somebody else’s problem so today? “fuck it!!” (and uber drivers).

This was too important to settle, she conned us (and maybe herself) but we placed our faith in a charlatan that either does not appreciate the issues or simply does not care.

It’s not in their ‘official deactivation policy’ which would tell me you may/may not be deactivated for it. Drivers have been deactivated in the past.

Frank C

Now looking at the settlement closely and more detailed,it seems the settlement is just a drop in a glass of water and 1/4 of that drop if for the lawyers who rather settle sooner than to drag it any longer (if I was a lawyer I would look for my interest too,unless I had plenty of money to not need it immediately and can wait longer), but who is it that they decide for all drivers?when they are not drivers themselves? I did was not ask to cooperate with any money to pay the lawyers or to be represented in any lawsuit that would affect me,so I am a bit disappointed as well because here we had a very strong opportunity to get Uber to start the real talks and do real changes immediately if they want to settle and have it on the agreement ,no only with money but a list of drivers requirements that are not even clear how to change things…

#1)the tip option : either uber makes it public in every riders account and adds the tipping option in the app OR a direct 15% fee as gratuity for the driver on every billed ride (still cheaper than any taxi ride and taxis get the tip on top too,is expected). Just like some restaurants in LA now don`t require for customers to tip because the gratuity WILL be included on the bill , so customers just don`t favor few waiters and nothing for others and all the servers will have to treat all their customers equally for the sake of the restaurant`s reputation of service.

#2)if the lawsuit was a way to force and pry open the uber doors to inject some sense into their way of treating the drivers, this association is a good idea but is not a immediate change to rely on either or even has a time frame to be implemented and after the settlement uber can drag this forever too because who is who to be the ones to “represent drivers ” and uber funds to create it? I can only hope see uber trying hard to create and fund something that is going to be used against their own interest in a form of a “drivers union/association”, very hard for the people who will be the representatives and probably they will need a some kind par time salaries to have the time to put together any “fight” in paper, group meetings , office expenses, time expenses…I have no idea who even wants to be the “lidder” ( Harry? 🙂 )
#3)the “dirty pool ” has a lot of wrinkles to be fix, first don`t treat us like stupid kids to tell us we are going to make more money while paying a lower per mile/time rate to drivers, that is a direct insult to all thinking adults here ; while making us drivers to work harder and confusing at times while pax in the car ,pulling us out of freeways while in the carpool lanes to get back a missed ramp trying to pick up the second call that takes for ever get the info update,get the address, get the gps to calculate the new route , recalculate if gps keeps thinking , few miles have past and we still don`t have a where or how to get there, mean while driving and distracted looking at a phone at at least 50mph because we cannot just immediately stop in the middle of a freeway and pull a unsafe stunt to not get a “low acceptance rate” when the ping comes … is a ridiculous waste of time and danger for drivers and pax to stop where ever we are to get all this new info …riders who take it don`t even like it most of the time and take it on the drivers rating because they cannot rate uber,so they take their frustrations on us!
#4)if uber says the paying rate will be cut “temporarily” lower because a low season is coming ,why is the “season” lasting all year? … another stupid foolish game they play with us every year and prices never get back, using the drivers pay to kill the competition and monopolize the market themselves .
Anyways, I am just rating here but I got to get work and make some money to pay the bills .. I appreciate your blogs of useful information and the opportunity to input my .2 cents, Thank you. …Uber on Harry!

I think you’re right – if this settlement is going to apply to all drivers, shouldn’t they have some say in it?

I Pledged Allegiance

I think I’m burned out on class action lawsuits. Talk about a pyramid scheme If I ever saw one it’s class action lawsuits.
And for lawyers who bring on these class action suits it’s getting to be like that movie groundhog day. I know , because I unfortunately made the mistake of contacting an attorney listed on a class action lawsuit I received in the mail one day against the big box retailer that I was asked to resign from the company after being bullied by a sociopathic manager who used me for target practice . I made the mistake of crying on the shoulder of an attorney when I should have gone to a therapist.

About

I'm Harry, the owner and founder of The Rideshare Guy Blog and Podcast. I used to be a full-time engineer but now I'm a rideshare blogger! I write about my experience driving for Uber, Lyft, and other services and my goal is to help drivers earn more money by working smarter, not harder. Read More…

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